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The sales process is the heart of any company's distribution system. Its ultimate success is based on the salesperson's ability to develop trust and create rapport with a prospect. The salesperson's ethics and values contribute more to the process' success than any specific technique or strategy the agent might use. For a professional, selling is not a one-way transaction; instead, it is a collaborative process in which the professional and the buyer work together to achieve an exchange of value.
The Approach
"You never get a second chance to make a first impression" the old saying goes. The initial meeting with a prospective client — the so-called "approach" — is a critical one. Whether the salesperson is an agent, stockbroker or other financial services agent, he or she must be viewed as both competent and credible before the prospective client will trust the salesperson with the client's personal financial information.
The purpose of the approach step of the sales process is to cause the prospective client to come to the understanding that the agent is someone with whom he or she may want to do business as a result of the rapport that has been created. The approach may be accomplished in any number of environments -- in person, on the phone, etc. — but to be ethical, any information imparted to the prospect in the approach step must be balanced and complete.
This step of the sales process allows the agent to present him- or herself to the prospective client, the most serious ethical issue in the approach step has to do with the agent's stating or implying that he or she has skills, experience or credentials that are not possessed. Consider, for example, the declaration that the agent is a financial planner or financial adviser when, in fact, the agent is a life insurance agent or registered representative. Such a statement could suggest to the prospective client that the agent was in the business of providing unbiased analyses of client financial situations while having no inherent conflict of interest. Of course, the agent's selling of financial products clearly creates such a conflict and makes that kind of statement misleading and a breach of ethics.
Misleading Credentials
Another type of misrepresentation occurs when agents use credentials to mislead prospects into thinking the agent is more experienced and knowledgeable than is indeed the case. There are a number of organizations that, for a fee, will simply hand out credentials and official-looking designations to bolster the agent's résumé.
In 2008, Florida law was amended to specifically prohibit agents from using designations that misrepresent the agent qualifications:
¨ When making a sales presentation or solicitation for insurance, an agent is prohibited from utilizing designations or titles that falsely imply that he or she has special financial knowledge or has obtained specialized financial training or is certified or qualified to provide specialized financial advice to senior citizens.
¨ Terms such as “financial advisor” may not be used to falsely imply that an agent is licensed or qualified to discuss, sell, or recommend financial products other than insurance products.
¨ When making a sales presentation or solicitation for insurance, an agent is prohibited from falsely implying he or she is qualified to discuss, recommend, or sell securities or other investment products in addition to insurance products.
The law makes exceptions for bona fide credentials. An agent who also holds a designation as a certified financial planner (CFP), chartered life underwriter (CLU), chartered property casualty underwriter (CPCU), chartered financial consultant (ChFC), life underwriter training council fellow (LUTC), or the appropriate license to sell securities from the Financial Industry Regulatory Authority (FINRA) may inform the customer of those licenses or designations and make recommendations in accordance with those licenses or designations.
The manner in which the agent holds him- or herself out to the prospective client could also impact the client's reasonable expectations and the agent's liability. The reason for that heightened liability may be obvious; if the agent represents or implies that he or she has certain skills, the client may have every right to expect the agent to provide service at a level expected of one who possesses those skills. Failure to provide that expected level of service could make the agent liable for damages the client sustains as a result.
Some agents may choose to use a trade name. While using a trade name is certainly acceptable, its use by the agent as a way of identifying him- or herself without also identifying the company being represented would be misleading. To the extent that it misleads, it is unethical. Consider, for example, the life insurance agent who identifies himself simply as a member of the "The Suncoast Group" in order to disguise his affiliation with a life insurance company. There should be no question about the ethical value of that deception. The agent is clearly attempting to mislead his prospective client, an obviously unethical act. Any implication by the agent that he or she is affiliated with the government or any governmental agency in an attempt to suggest governmental approval of the agent or products is unethical.
Ethical Concerns During the Approach
Discussion in the approach step of the products being offered presents another area that could create ethical concerns. As in the other areas we've discussed, the ethical requirement is for full and fair disclosure. Any product discussion should have as its objective a complete understanding by the listener. Here are some practical examples of the meaning of full and fair disclosure:
¨ If the agent states or implies that the products offered involve tax advantages, it should also be stated that only a thorough review of the client's situation would determine if those advantages apply to him.
¨ The real nature of the product should not be obscured through the use of unfamiliar names. Any product should be identified by its common name. As an example, the use of the term "plan” or “private pension” to describe a life insurance policy could be unethical since those terms would tend to obscure the true life insurance nature of the product. Likewise, to refer to an HMO as “health insurance” would mislead potential purchasers as to the nature of the underlying product.
¨ Using highly technical information about the products being offered that could be expected to mislead the person(s) receiving the information is unethical even if the information is true in every regard. If the initial approach is made by telephone, as is normally the case, the agent should usually avoid discussion of specific products since adequate explanation in the relatively short space of time on the telephone is difficult. An attempt to discuss a complex financial product in this setting often results in misunderstandings. Unless the prospect is highly knowledgeable with respect to the product, a brief explanation is more likely to cause confusion rather than understanding.
¨ Even providing the prospect with a disclosure documents such as an outline of coverage or prospectus — without a discussion of the various costs of the product with the prospect -- could be unethical if the agent believed the documents would not be read. A failure to discuss costs would be less than full and fair disclosure.
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Chapter 5 Contents
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